Mind Over Market

A study by the Urban Institute has found that the big stock market crash of 2008 may not seriously impair retirement incomes if equity values recover halfway by 2017. In a computer simulation of a partial recovery in equity values, the overwhelming majority of people age 43 and older will have retirement incomes no less than they would have earned if there had been no crash at all in 2008. This surprising outcome is based on the assumption that workers did not sell their equity holdings during or after the crash, continue to make the same level of contributions to retirement plans, and continue to invest in equities at a level appropriate for their age. By Robert Stowe England mindovermarket.blogspot.com June 29, 2009 In spite of the losses from the stock market crash of 2008, the overwhelming majority of people age 43 and older are unlikely to see see lower retirement income than they would have received if there had been no stock market crash at all, according to a study by the Urban...

http://www.youtube.com/watch?v=cJqM2tFOxLQ&ampfeature=channel A YouTube video of a series of questions by Representative Alan Grayson directed at Federal Reserve Board Inspector General Elizabeth Coleman has garnered over 1.5 million viewings to date. The popularity of the video reflects both public frustration with holding the Fed accountable and the power of the Congressional star chamber to create a media sensation. By Robert Stowe England mindovermarket.blogspot.com June 27, 2009 In a nearly empty House hearing room, Rep. Alan Grayson, the Democrat representing the 8th District of Florida, asks Federal Reserve Board Inspector General Elizabeth Coleman a series of questions, which she is unable to answer to his satisfaction. Grayson posted the grilling on YouTube May 6 and the video has garnered 816,408 views so far. He reposted the exchange in a higher quality version May 12, which so far has garnered 696,292 viewings. Here is a link to the May 12 YouTube video: http://www.yout...

In a joint hearing before the Department of Labor and the Securities and Exchange Commission, regulators questioned the make-up of target-date funds and the disclosures related to them. Such funds have been increasingly popular with plan sponsors -- as well as employees -- but even some with the same target date have widely divergent equity allocations. By Robert Stowe England Human Resource Executive Magazine June 25, 2009 Closer scrutiny of target-date funds by the U.S. Department of Labor and the Securities and Exchange Commission is likely to prompt new regulatory initiatives by both government agencies. A lengthy day-long joint DOL-SEC hearing on June 18 highlighted a number of issues facing employers that include target-date funds as options in company-sponsored plans, especially when the target-date funds are designated as a default investment. To read the full story at Human Resource Executive click on this link: http://www.hreonline.com/HRE/story.jsp?storyId=225086569

Fed Governor Elizabeth Duke took a look at recent key credit market indicators and compared them to credit declines in past recessions to measure the impact of the Fed's 'credit easing' policies. She found that, except for home mortgages, credit declines in this downturn have not been as severe as in past recessions. Further, the decline in home mortgages is not particularly large in comparison to declines in some credit markets in the past. Given the severity of the current financial crisis, this is an “early indication” that the Fed’s policies have been “broadly successful in relieving stresses in the key credit markets,” according to the Fed Governor. By Robert Stowe England June 22, 2009 Last week Federal Reserve Board Governor Elizabeth A. Duke took time out, she said, “to look back on the policies that have been implemented throughout the financial crisis and consider how well they have worked to lessen the broader impact of financial market disruptions.” Duke, who jo...

The Economist online today called for abolishing current retirement schemes and starting over. In support, George Magnus argued that current schemes are unsustainable. Opposing, Christian Weller contended that the current system can be put right if we have the will to do it. Voters so far have given the proposal a resounding online victory. By Robert Stowe England June 16, 2009 This house believes that retirement in its current form should be abolished. With that proposition, intended to shock the reader and prompt debate, The Economist , the bright and brassy British weekly, this morning launched a lively online discussion about the design, cost, security and sustainability of current Social Security and other private and public retirement schemes around the world. The proposal was published on The Economist Web site at this location: http://www.economist.com/debate/overview/147 From the launch of the debate, the 'yes' choice had a supermajority of total votes. By the end of...

American households have dramatically turned away from years of rising spending and borrowing to embrace a new ethic of thrift and saving. This change of heart appears likely to continue for many years, which suggests the United States will have a weaker economic recovery than has been seen after other post-war recessions. While painful in the short term, this return of thrift will be beneficial in the long run. By Robert Stowe England June 14, 2009 [ Note: The following remarks were made at the 30th annual conference of American Independent Writers at George Washington University in Washington, D.C. on June 13.] Whatever history’s ultimate conclusion about the current economic downturn, it has already earned its place in the record books on several accounts. We have the highest unemployment rate in 25 years at 9.4 percent. We have lost 5.4 million jobs. Housing prices have declined the most since the Great Depression. More national debt has already been created during this downturn th...

The Department of Labor and the Securities and Exchange Commission will hold a joint one-day hearing June 18 to explore issues that have been raised about target-date funds or life-cycle funds. These are funds that allocate assets into a mix of stocks and bonds based on the age of the investor, with higher equity allocations for younger investors. The poor performance of these funds in the market crash has raised issues about their appropriateness in employer-sponsored retirement saving plans. By Robert Stowe England June 8, 2009 The Department of Labor gave its regulatory blessing to target-date or life-cycle funds in the fall of 2007 at the peak of the market, giving employers the green light to offer these funds to employees who had not made a choice among the investment options in an employer's 401(k) plan. DoL then identified target-date funds as one allowable choice for so-called qualified default investment options (or QDIA's in the lingo of the bureaucrats). For more in...

Federal Reserve Chairman Ben Bernanke today told Congress that the central bank has no plans to monetize the sharply rising deficits of the United States and defended the Fed's program to purchase Treasuries. He told Congress of the need for Washington to control spending and set appropriate tax levels, in consultation with the American people, to achieve 'fiscal sustainability' in the long term. By that he meant a situation where the ratio of government debt service to the size of the economy is stable or declining. By Robert Stowe England June 3, 2009 In his appearance before Congress today Federal Reserve Board Chairman Ben Bernanke responded directly to mounting worries about sharply rising budget deficits in the United States, amid growing concern among major international investors in U.S. Treasuries, from China to Saudi Arabia, that the Fed might monetize those deficits. If the Fed were to monetize the debt issued to cover most of the rising deficits, it could lead t...